Sunday, July 17, 2011

One possible casualty of the endless U.S. budget fight may be the federal subsidy for corn ethanol production. There's been a lot of quiet, and some not-so-quiet, cheering from the environmental community, based on the premise that eliminating the subsidy will lessen nutrient pollution from growing so much corn.

In reality, cutting or repealing the 45-cents-per-gallon ethanol tax credit is unlikely to have much of an effect on planting decisions. As a recent article in the NY Times nicely explained last week, the subsidy is, at this point, unnecessary. Between laws requiring blending of ethanol into gasoline, the federal ethanol mandate, the tariff on imports, the size of the ethanol production industry, and the high price of corn, there's already enough incentive to maintain the status quo in corn production and corn ethanol production.

There are certainly good reasons to eliminate the subsidy. No one should pretend that doing so will solve of the problem of nutrient levels in the Mississippi River and the Gulf of Mexico. That is a far greater challenge.